16 Jul What Does It Mean To Run Businesses Better? Real Time Analytics – No. 1 of a 3 part series
It would be difficult to find a more anodyne goal than helping businesses run better. Isn’t running your business better what every consultancy promises? Isn’t that why companies hire consultants in the first place? Yet today’s blog is about this very point and I’m going to make the case that improving your company’s financial and operating performance – every time and with every engagement – is the standard you should use when retaining consultants.
To help businesses run better requires three essential elements: real-time analytics, improved workflows, and innovation. Today’s blog is about Real-Time Analytics.
To effectively manage any business, leaders need to track revenue and profitability on operating P&Ls on a daily or weekly basis making sure they are accurately capturing field data and figuring out what triggers events. Let’s parse that last sentence for its five essential elements. The first is pretty simple: revenue and profitability are essential “must-knows” for any business. The second is more nuanced. When I say operating P&Ls, I mean that they are different than legal entity P&Ls which are typically housed in an ERP like Oracle or JD Edwards. ERPs are designed with reporting in mind and thus are really proficient at tracking what gets reported to shareholders and for tax reporting purposes. And while reporting is an important function, if that’s also the source for operating information – and the operating entities do not track with the legal entities which is almost always the case – the resultant output is both difficult to use and poor at prediction.
Operating P&Ls need to be created by the product, business line, business unit, region, country, etc. and this information should be generated on a daily or weekly basis. Too often companies aren’t closing their books on a timely basis or if they are, they have many correcting journal entries in subsequent months. Not only does this create more work for the accounting function, but it also obliterates a company’s ability to use this information predictively. The next piece is accurate field data capture – again, on the surface this seems simple. But no matter the industry, every minute of every day, somewhere in the field, information is being turned in late, inaccurate, or incomplete. This is human nature. It’s how a company manages this challenge that determines how accurately they close their books. And finally, once companies are getting accurate information, they can start mapping the triggering events and activities that cause revenue and cash flow to change, further enhancing their ability to predict.
Real-time analytics is the first key to helping companies run better. More often than you would think, companies are operating their business with only pieces of real-time information and even those may not be reliable.
In our next blog, I’ll delve into how improved workflows are essential to helping businesses run better.
Brian Spector, Chief Development Officer – Sirius Solutions, L.L.L.P.
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